Global House Price Index ‘nearly back to its peak’ – IMF

Still no sign of a bubble, though

The number of countries experiencing rapid house price growth of >5% – which sets economists’ alarm bells ringing in the wake of 2005-8’s bubbling – has roughly doubled over the last four years, but the International Monetary Fund stands by its “tentative” position that there’s no global property bubble at the moment.

Having said that, the IMF Global House Price Index “is nearly back to its prior peak”, as of Q2 2017 – although today’s property value inflation is “more stable and perhaps sustainable”, with credit going to “a notable step-up in the implementation of macroprudential policies designed to curb excesses in the provision of mortgage credit”.

The IMF’s assessment of some selected international property markets

  • Belgium (March 2017)
    “Further macroprudential actions may be needed to address pockets of vulnerability in the housing market. Concerns relate to the continued growth in house prices, combined with rising household indebtedness and significant shares of risky mortgage lending practices, as well as strong expansion in mortgage credit. Various overvaluation estimates are in the range of 0–20%.”
  • Israel (March 2017)
    “Supply-side bottlenecks need to be addressed to improve housing affordability and contain macrofinancial risks. Housing prices are very high, posing a vulnerability while disproportionately affecting low-income households. Reforms should improve municipal incentives for development, ensure adequate land privatization and urban renewal, shorten approval times and reduce construction costs. Macroprudential policies are appropriately tight and the Bank of Israel should monitor developments closely.”
  • Luxembourg (May 2017)
    “Against the backdrop of an expanding population, low interest rates and binding supply side constraints, residential real estate price-to-income ratios in Luxembourg have become elevated by historical and global standards […]. After a marginal decline in 2009, nominal home prices have since increased 30% (or 22% in real terms), a period over which real disposable income of the local population has been flat, though GDP and employment growth continued. Supply bottlenecks make housing less affordable to residents.”
  • Malaysia (May 2017)
    “Risks associated with the housing market appear to be receding. House price growth has moderated, following several years of elevated growth, and risks are circumscribed by ongoing supply constraints, increases in public sector wages, and, from a more structural perspective, Malaysia’s relatively young labor force and urbanizing population. The risk of a sharp decline in house prices should nevertheless be carefully monitored. If rapid house price growth resumes, LTV caps on second and first mortgages could be considered.”
  • Netherlands (April 2017)
    “House prices have been accelerating and close monitoring may be warranted in the country’s main cities. After turning a corner in 2014, house prices have been steadily accelerating and transaction volumes have doubled in 2016. At the aggregate level, real house prices are broadly consistent with long-term equilibrium (price-to-income, price-to-rent ratios, […] but developments have been uneven across regions, with prices for apartments in Amsterdam 15% higher than a year ago. After plummeting by 20% during the crisis, commercial real estate has only started to recover recently.”
  • New Zealand (May 2017)
    “New Zealand’s mainly LVR-related housing market-specific macroprudential measures would appear to have had some moderating influence on mortgage lending, expected and actual house price growth, and the quality of loan composition. In addition, they have also helped to contain household leverage. However, they do not seem to have prevented a continuous deterioration of borrower households’ vulnerability against debt servicing capacity risks, such as higher interest rates or income shocks.”
  • San Marino (April 2017)
    “Credit growth continues to be subdued, and activity in the housing market remains at the low level. […] In the housing market, the number of real estate sales remains low, but the average tax per transaction for non-leasing properties, which is likely correlated with real estate prices, has stabilized.”
  • Slovak Republic (March 2017)
    “House prices have increased in some regions, but remain below their pre-crisis levels […] The authorities have stepped up macroprudential measures since 2014 to preserve lending standards and increase buffers. Following the implementation of the Housing Loan Act (HLA) in March 2016, the NBS has a mandate to issue binding decrees imposing limits on debt service to income (DSTI) and LTV ratios, which are set to further tighten in 2017.”